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Market Value and Patent Citations: A First Look

  • Bronwyn H. Hall
  • Adam B. Jaffe
  • Manuel Trajtenberg

As patent data become more available in machine-readable form, an increasing number of researchers have begun to use measures based on patents and their citations as indicators of technological output and information flow. This paper explores the economic meaning of these citation-based patent measures using the financial market valuation of the firms that own the patents. Using a new and comprehensive dataset containing over 4800 U. S. Manufacturing firms and their patenting activity for the past 30 years, we explore the contributions of R&D spending, patents, and citation-weighted patents to measures of Tobin's Q for the firms. We find that citation-weighted patent stocks are more highly correlated with market value than patent stocks themselves and that this fact is due mainly to the high valuation placed on firms that hold very highly cited patents.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 7741.

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Date of creation: Jun 2000
Date of revision:
Publication status: published as Hall, Bronwyn H., Adam Jaffe and Manuel Trajtenberg. "Market Value And Patent Citations," Rand Journal of Economics, 2005, v36(1,Spring), 16-38.
Handle: RePEc:nbr:nberwo:7741
Note: IO PR
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  9. Bronwyn H. Hall, 1990. "The Manufacturing Sector Master File: 1959-1987," NBER Working Papers 3366, National Bureau of Economic Research, Inc.
  10. Mark Schankerman, 1998. "How Valuable is Patent Protection? Estimates by Technology Field," RAND Journal of Economics, The RAND Corporation, vol. 29(1), pages 77-107, Spring.
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  21. Ariel Pakes & Mark Schankerman, 1984. "The Rate of Obsolescence of Patents, Research Gestation Lags, and the Private Rate of Return to Research Resources," NBER Chapters, in: R&D, Patents, and Productivity, pages 73-88 National Bureau of Economic Research, Inc.
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